The Deal:
Let me hit you with the deal lesson right off the bat, buying off-market (below market value) IS VERY FORGIVING. That’s because when you buy below market value there are numerous exit strategies you can implement.
This property was intended to be a BRRRR but we actually ended up flipping it instead. Why? Because while we were rehabbing the property our team began investing in Joshua Tree short-term rentals. The return on investments in Joshua Tree were insane so we all agreed that it made more sense to take the profits of this property and invest it in Joshua Tree. This house was the first house we bought in Decatur, a neighboring city in the greater Huntsville area.
Deal Source: Our good ol’ friends at Resilient Invest (Wholesale). If you want good, off-market deals, make good business relationships with good people.
Property Details:
-Single Family Home.
-2 bedroom 1 bath, space for 3rd bedroom.
-1,069 sq ft.
-Previous buyer failed to close on the property.
Strategy: Flip (We intended to BRRRR but we flipped instead).
Estimated Numbers:
Remember, we intended this property as a BRRRR first:
Purchase: $55k
Repairs: $26k
Rent: $875
ARV: $100k
Financing:
Cash: At this point we had money from previous cash-back refinances, cash flow from our current rentals, and monthly savings from each team member. Cash transactions are the EASIEST transactions for real estate.
Rehab:
When we started the rehab, our intention was just to make it rental-ready. A rental rehab is very different from a flip rehab. Rental rehabs are lower-cost and functional while flip rehabs are more expensive and trendy. However, the Huntsville market was SO HOT that a rental rehab still gave the desired profit we needed. Since rental rehabs were what we knew, it’s what we did for this property.
The newest experience for our team was working with the city to get capital expenditures up-to-code. We literally redid everything in this house: new roof, updated electrical, plumbing, added a third bedroom, landscaping, floors, paint, appliances, etc.. As we opened something up, more things were discovered and needed to be addressed; a classic real estate rehab story. Overall, we spent about $50k to turn this property into an updated, safe place to live. Perfect as a turnkey property for another investor.
End Result:
Purchase: $55k
Repairs: $50k
Sold: $129k
Profit: $24k
As I mentioned earlier, the profit from this deal made more sense to invest in Joshua Tree than it did to keep as a rental, especially after the extensive rehab. Again, when you buy below market you have numerous options and will most-likely end up still making money. This deal was a great learning experience and our team was thrilled to put the profits toward our Joshua Tree short-term rentals (future blog posts coming soon)!
Lessons Learned:
- Buying below market allows for multiple exit strategies.
- Getting things up-to-code takes A LONG TIME.
- Hot markets suck for buying, but great for selling.
- Always reevaluate your deals and figure out the strategy that has the highest ROI.
Before & After Pictures:
